Israel Aircraft Industries (IAI) expects compensation from the USA after Israel was forced to cancel a Phalcon airborne early warning (AEW)system sale to China.

Israeli prime minister Ehud Barak announced that the deal had been abandoned during a visit to the USA, where he is participating in a peace summit with Palestine.

The cancellation follows pressure from the USA, which is opposed to the transfer of radar technology to China. IAI sources say they expect a compensation package and suggest the USA has indicated that this is a possibility.

Barak has sent Amos Yaron, director-general of the Israeli defence ministry, to Beijing with a letter of explanation for Chinese president Jiang Zemin.

The $250 million Phalcon deal was signed in 1995. China has paid $80 million as part of the contract.

Opposition to the deal has soured the relationship between the USA and Israel. The US Congress threatened to cut military aid to Israel by $250 million if the aircraft was handed over to China.

A Russian-built Beriev A-50 (modified Ilyushin Il-76) on which IAI subsidiary Elta was to install the Phalcon system is parked at the company's facility at Ben-Gurion International airport.

Source: Flight International